Latest / The Dutch Investors / #91 | Porsche AG Deep Dive | 911 Problems but the Story Ain't One

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#91 | Porsche AG Deep Dive | 911 Problems but the Story Ain't One · The Dutch Investors

0:09
SPEAKER_00: Welcome back to another TDI Premium Deep Dive.
0:13
SPEAKER_00: The company we'll be discussing today has a very rich history that is down almost 70% since its IPO in 2023.
0:25
SPEAKER_00: Imagine you're standing in a dimly lit, hypermodern press room in Stuttgart on a beautiful morning.
0:32
SPEAKER_00: The air is thick with the scent of expensive espresso and the unspoken tension of a multi-billion euro crisis.
0:41
SPEAKER_00: At the front of the room, Dr.
0:44
SPEAKER_00: Michael Lithers steps towards the microphone.
0:48
SPEAKER_00: He's a man who's navigated the high-stakes engineering worlds of Ferrari and McLaren, but he's only 70 days into his tenure as the CEO of Porsche.
1:00
SPEAKER_00: He is already being asked to perform an autopsy on what Medi considered the most catastrophic financial year in the brand's modern history.
1:10
SPEAKER_00: Behind him, a slide displays.
1:13
SPEAKER_00: A number that seems almost impossible for a company that was, just a few years ago, the undisputed profit engine of the automotive world.
1:24
SPEAKER_00: An operating profit of just 413 million euros.
1:30
SPEAKER_00: That doesn't sound bad, right?
1:32
SPEAKER_00: Well, to put that in perspective, that was almost a 93% drop from the previous year.
1:40
SPEAKER_00: For every euro they were making just 24 months ago, they're now scraping together pennies.
1:48
SPEAKER_00: This is where our story starts.
1:50
SPEAKER_00: We're not just looking at a regular car company.
1:53
SPEAKER_00: We're looking at a cultural icon that has spent the last century trying to outrun its own history, while simultaneously selling that history as its primary product.
2:06
SPEAKER_00: To understand how Porsche ended up here and whether it can find its way back, we have to look past the polished chrome and the leather stitch dashboards.
2:16
SPEAKER_00: We have to look at the human messiness, the family feuds, geopolitical traps, and the engineering gamble that divines Porsche.
2:27
SPEAKER_00: Let's take a drive through Memory Road and discuss Porsche.
2:52
SPEAKER_00: That's when an engineer named Ferdinand Porsche opened a small consulting firm in Stuttgart.
2:59
SPEAKER_00: Ferdinand was a man obsessed with technical perfection, a trait he sharpened at Daimler.
3:06
SPEAKER_00: But in the 1930s, technical perfection required a patron, and the patron Ferdinand found was none other than Adolf Hitler.
3:18
SPEAKER_00: This is the dark side of the story that marketing brochures rarely mention.
3:25
SPEAKER_00: Ferdinand was tasked with creating the Volkswagen Beetle, the People's Car, a project designed to be the industrial pride of the Nazi regime.
3:37
SPEAKER_00: The engineering was by all accounts brilliant.
3:40
SPEAKER_00: The torsion bar suspension Ferdinand patented in 1931 became a cornerstone of automotive design.
3:48
SPEAKER_00: But during the war, that brilliance was turned towards the machinery of death.
3:54
SPEAKER_00: Volkswagen's factories were repurposed for military production, and they were built on the backs of forced labor, including Jewish prisoners.
4:05
SPEAKER_00: When the war ended, Ferdinand Porsche was arrested by the French for war crimes and spent over a year in prison.
4:13
SPEAKER_00: It's 1947.
4:15
SPEAKER_00: Germany is in ruins.
4:17
SPEAKER_00: The Porsche family name is associated with the shadows of the 20th century Darkest chapter.
4:24
SPEAKER_00: Ferdinand is in prison, and his son Ferry Porsche is left to pick up the pieces in a converted sawmill in Gmund, Austria.
4:34
SPEAKER_00: This was the brand's first valley of death.
4:38
SPEAKER_00: With no big factory and no assembly line, Ferry asked the question that would divine the next 75 years.
4:47
SPEAKER_00: Why don't we just build our own car?
4:51
SPEAKER_00: That first car, the Pors 356, was built using Beetle Parts because that was all they had.
4:59
SPEAKER_00: It wasn't beautiful.
5:00
SPEAKER_00: It was simple, efficient, but beautifully balanced.
5:05
SPEAKER_00: It was a sports car, born of necessity.
5:08
SPEAKER_00: By the time Ferdinand was released from prison, he saw a car that bore his name, not as a consultant he started out with, but as a manufacturer.
5:19
SPEAKER_00: The proceeds from early contracts were literally used to post bail for the elder Ferdinand.
5:25
SPEAKER_00: This was a company built on survival instinct, an important trait they would need again and again.
5:33
SPEAKER_00: By the early 1960s, the 356 was getting old.
5:37
SPEAKER_00: The company needed something new.
5:40
SPEAKER_00: And what they got was the 911, introduced in 1963.
5:45
SPEAKER_00: If you're an investor, the 911 is the most fascinating case study in brand equity, perhaps ever.
5:54
SPEAKER_00: Originally called the 901, the name was only changed because Peugeot had a trademark on car names with a zero in the middle.
6:03
SPEAKER_00: Think about the discipline required to keep a design essentially unchanged for over 60 years.
6:10
SPEAKER_00: Porsche understood early on that in the luxury world, continuity is a form of currency.
6:17
SPEAKER_00: They did not reinvent the 9-11, they refined it.
6:21
SPEAKER_00: And this consistency created a mode of brand loyalty that few other car manufacturers can match.
6:29
SPEAKER_00: Even today, over two-thirds of all Porsches ever made are still on the road.
6:36
SPEAKER_00: I mean, that's a testament to engineering.
6:39
SPEAKER_00: It's a statistic that supports the resale value and the scarcity myth that allows Porsche to charge premium prices.
6:48
SPEAKER_00: But while the 9-11 was becoming an icon, the family behind it was becoming a battlefield.
6:56
SPEAKER_00: In the early 1970s, the third generation of Porsche and Piech families, the descendants of Ferdinand's son and Ferry, and his daughter Louise were essentially at each other's throats for control.
7:10
SPEAKER_00: The friction was cultural as much as it was professional.
7:15
SPEAKER_00: Ferry sent his children to creative Waldorf schools.
7:19
SPEAKER_00: Louise sent hers to militaristic boarding schools.
7:22
SPEAKER_00: The clash between creative Porscheus and Militant reached such a fever pit that in 1972 the family made a radical decision.
7:32
SPEAKER_00: They would all withdraw from day-to-day management and hire professional managers.
7:39
SPEAKER_00: This move likely saved the company from imploding, but it didn't end the rivalry.
7:46
SPEAKER_00: One family member, Ferdinand Piech, would go on to become the chairman of Volkswagen, turning it into a global giant, and eventually leading the charge to absorb Porsche itself.
8:02
SPEAKER_00: The dynamic between these families is the human messiness that makes Porsche's corporate governance a nightmare for some and fascination for others.
8:13
SPEAKER_00: By the early 1990s, the icon was failing.
8:18
SPEAKER_00: In 1992, Porsche sold just 14,000 cars, down from over 50,000 cars just a few years earlier.
8:27
SPEAKER_00: The company was losing$150 million a year, and the production process was an absolute disaster.
8:35
SPEAKER_00: Cars were being hand-built in inefficient ways that didn't scale.
8:42
SPEAKER_00: They were a niche manufacturer in a world that was moving towards mass market efficiency.
8:48
SPEAKER_00: Enter Wendelin Wiedeking in 1993.
8:53
SPEAKER_00: Wiedeking didn't look for answers in Germany.
8:56
SPEAKER_00: He looked to Japan.
8:58
SPEAKER_00: He brought in consultants, former Toyota manufacturing experts, who were appalled by what they saw.
9:05
SPEAKER_00: They described the Sufenhausen factory not as a car plant, but as a rust-covered death trap for capital.
9:14
SPEAKER_00: Wiedeking performed a lean revolution.
9:16
SPEAKER_00: He sought the factory storage shelves in half to force a reduction in inventory.
9:23
SPEAKER_00: He slashed assembly time from 120 hours to 72 hours and reduced defects by 50%.
9:33
SPEAKER_00: But his most controversial move was the product itself.
9:37
SPEAKER_00: He realized that to save the 9-11, Porsche had to build a car that purists hated.
9:45
SPEAKER_00: The Cayenne SUV.
9:48
SPEAKER_00: The Cayenne was the ultimate anti-PR move.
9:52
SPEAKER_00: The Cayenne was the ultimate anti-PR move.
9:56
SPEAKER_00: It was an SUV from a sports car company.
10:00
SPEAKER_00: It shared parts with Volkswagen.
10:03
SPEAKER_00: It was blasphemy.
10:05
SPEAKER_00: But financially it was a very good move.
10:09
SPEAKER_00: The Cayenne provided the high margin cash flow that funded the next generation of sports cars.
10:15
SPEAKER_00: It proved that Porsche could move into new categories without losing its soul.
10:21
SPEAKER_00: Provided the engineering remained Stuttgart Great.
10:25
SPEAKER_00: Flush with cash from the Cayenne and the Boxster, Porsche did something truly insane in 2008.
10:33
SPEAKER_00: While the global financial system was melting down, Porsche's management attempted a David vs.
10:39
SPEAKER_00: Goliath takeover of the much larger Volkswagen Group.
10:44
SPEAKER_00: They did this through complex financial derivatives, quietly accumulating a 74% stake in Volkswagen.
10:54
SPEAKER_00: When they finally revealed their hand on October 26, 2008, the world realized that with the state of Lower Saxony holding that with the state of Lower Saxony holding another 20%, only about 5% of Volkswagen shares were actually available to trade.
11:17
SPEAKER_00: Hedge funds had been shorting Volkswagen, betting the price would fall.
11:22
SPEAKER_00: Suddenly they were trapped in what investors call the death trap.
11:27
SPEAKER_00: Volkswagen stock exploded from 210 euros per share to over a thousand euros per share in just two days, briefly making Volkswagen the most valuable company on earth.
11:43
SPEAKER_00: It was a master stroke of financial engineering, but it was also a disaster.
11:50
SPEAKER_00: The credit markets froze.
11:52
SPEAKER_00: Porsche couldn't refinance the debt they used to build the position.
11:57
SPEAKER_00: And in a poetic bit of corporate drama, Volkswagen ended up buying Porsche to save it from insolvency.
12:06
SPEAKER_00: The Predator had become prey.
12:09
SPEAKER_00: By 2012, Porsche was fully integrated into the Volkswagen Group, a move that set the stage for shared platforms and massive scale.
12:21
SPEAKER_00: Fast forward to today, if 2008 was a crisis of ambition, 2025 was a crisis of reality.
12:31
SPEAKER_00: Porsche's operating profits didn't just dip but they vanished, falling over 93% to just 400 million euros.
12:41
SPEAKER_00: Deliveries dropped over 10% from 310,000 deliveries to just 280,000 deliveries.
12:49
SPEAKER_00: Net cash flow dropped another staggering 60%.
12:54
SPEAKER_00: So what happened here?
12:56
SPEAKER_00: Well, before we discuss that, we have to talk about China.
13:00
SPEAKER_00: For years, China was Porsche's gold mine, but in 2025, that gold mine went dry.
13:07
SPEAKER_00: Deliveries in China slumped by 26%, and the reason is simple.
13:13
SPEAKER_00: Chinese consumers aren't just impressed by mechanical excellence anymore.
13:18
SPEAKER_00: Nowadays they want software-defined vehicles, digital cockpits, and high-level autonomous driving, areas where Porsche has been lagging behind local rifles like BuyD, Xiaomi, or even Tesla.
13:33
SPEAKER_00: Analysts are even comparing Porsche to Nokia.
13:37
SPEAKER_00: They are so focused on making the world's best steering feel that they forget to make the world's best operating system.
13:45
SPEAKER_00: But the China slump was just one piece of the puzzle.
13:49
SPEAKER_00: The company also took a massive 4 billion euro extraordinary charge.
13:56
SPEAKER_00: Think of this as the management kitchen sinking.
14:00
SPEAKER_00: Every bad decision they've made over the last three years into a single report.
14:05
SPEAKER_00: Things like rescheduling platforms, lifecycle extensions, provisions for Sell Force restructuring, battery development, and a direct hit from the Trump tariffs.
14:17
SPEAKER_00: For years Porsche had been shouting that it was going all in on electric vehicles, targeting an 80% share by 2030.
14:27
SPEAKER_00: But the market had other ideas.
14:30
SPEAKER_00: The demand for ultra-luxury EVs slowed down, while the demand for the iconic 9-11, which still runs on gas, remained at record highs.
14:42
SPEAKER_00: One of the biggest friction points for investors was Oliver Bloom's dual role.
14:47
SPEAKER_00: He was the CEO of Porsche and the CEO of the entire Volkswagen Group.
14:53
SPEAKER_00: Imagine trying to run a high-performance athletic wear brand while simultaneously trying to fix a struggling global department store chain.
15:02
SPEAKER_00: Investors were vocal, they felt Porsche was being treated like a side hustle.
15:07
SPEAKER_00: By 2025, the pressure buildup became unsustainable.
15:12
SPEAKER_00: With Porsche's profits cratering and Volkswagen facing 50,000 job cuts and plant closures in Germany, the board finally relented.
15:23
SPEAKER_00: Effective January 1, 2026, Bloom stepped down as Porsche CEO to focus on Volkswagen, and Michael Leaders was brought in to save the brand.
15:35
SPEAKER_00: Now Leaders is a technical heavy hitter.
15:38
SPEAKER_00: He was the CTO of Ferrari and the CEO of McLaren.
15:42
SPEAKER_00: He is not a PR guy, he's a product guy.
15:46
SPEAKER_00: His arrival signals a retreat from the EV at all cost strategy, and his first major move is called Strategy 2035.
15:56
SPEAKER_00: This is a fundamental recalibration of the company.
16:00
SPEAKER_00: The goal is to make Porsche leaner, faster, and more desirable.
16:05
SPEAKER_00: In Leaders' world, desirable does not necessarily mean electric.
16:11
SPEAKER_00: One of the most telling examples is Project K1.
16:15
SPEAKER_00: This is the planned 7-seater flagship SUV.
16:19
SPEAKER_00: Originally, it was going to be electric only, but in September 2025, leaders made a bold choice.
16:28
SPEAKER_00: The K1 will now launch in 2028 with V6 and V8 combustion engines.
16:35
SPEAKER_00: They are literally going back to the future to protect their profit margins.
16:40
SPEAKER_00: This is value over volume in action.
16:45
SPEAKER_00: In China, Porsche is doing something almost unheard of.
16:50
SPEAKER_00: They are shrinking.
16:52
SPEAKER_00: Instead of fighting a price war with Chinese manufacturers, Porsche is cutting its dealership network by 30%, dropping from 150 outlets to just 80 in 2026.
17:07
SPEAKER_00: As the pie shrinks, the number of diners at the table must be reassessed.
17:12
SPEAKER_00: This is a move to keep the brand exclusive.
17:15
SPEAKER_00: If you can't sell 100k cars, you sell 40k and make sure the profit per car stays as high as possible.
17:24
SPEAKER_00: But this is a dangerous game.
17:27
SPEAKER_00: Dealers in some cities have already closed, leaving customers stranded and staff unpaid.
17:34
SPEAKER_00: There is a revolt brewing that could damage the brand's reputation for years.
17:39
SPEAKER_00: If you're looking at Porsche stock, you have to decide what you're buying.
17:44
SPEAKER_00: Are you buying a luxury brand like Ferrari?
17:47
SPEAKER_00: Or a premium brand like Mercedes?
17:50
SPEAKER_00: We think Porsche is more of a premium brand, not really a luxury brand.
17:56
SPEAKER_00: For example, in a tough year of 2025, Ferrari has achieved EBIT margins of almost 30%, while Porsche has achieved EBIT margins of just 1%.
18:08
SPEAKER_00: Even if we compare this to another premium player like Mercedes, they achieved EBIT margins in 2025 of around 12%.
18:17
SPEAKER_00: The market currently views Porsche as more Mercedes than Ferrari, and we think that's a fair assessment.
18:25
SPEAKER_00: Porsche is now being forced to prove that its road to 20 program, the goal of a 20% operating margin, is still possible.
18:34
SPEAKER_00: Leaders is betting on the ultra-luxury niche.
18:38
SPEAKER_00: He wants to build models above the 9-11 that command even higher prices through customization.
18:45
SPEAKER_00: This is basically the Ferrari playbook.
18:47
SPEAKER_00: Sell fewer cars, but make each one unique.
18:54
SPEAKER_00: Management is asking for patience, calling 2026 a year of recalibration.
19:00
SPEAKER_00: They expect revenue to stay flat while they work through the restructuring costs.
19:05
SPEAKER_00: The dividend has been slashed as well.
19:07
SPEAKER_00: And we can talk about a leaner, faster Porsche without talking about the people.
19:13
SPEAKER_00: To hit that targets, Porsche is cutting almost 2,000 jobs by 2029 and letting 2,000 temporary contracts expire.
19:22
SPEAKER_00: This is part of a broader failure at the Volkswagen Group level, which plans to cut a staggering 50,000 jobs in Germany by 2030.
19:33
SPEAKER_00: For a company that once prided itself on being a family business, the atmosphere has turned toxic.
19:40
SPEAKER_00: The worker councils are ready for demonstrations, and the management is holding on to power while profits evaporate.
19:48
SPEAKER_00: A demoralized engineering team cannot build the world's best cars.
19:54
SPEAKER_00: So where does that leave us?
19:57
SPEAKER_00: Porsche is a company defined by its ability to survive.
20:01
SPEAKER_00: It survived the wreckage of 1945, the inefficiency of 1992, and the financial overreach of 2008.
20:10
SPEAKER_00: But the crisis of 2026 is different.
20:14
SPEAKER_00: This is not just a financial crisis, but a crisis of identity, which is exactly what you're selling as a premium or luxury brand.
20:24
SPEAKER_00: Porsche is no longer competing against Ferrari on a racetrack.
20:29
SPEAKER_00: They are competing against Silicon Valley on software and China on EVs.
20:35
SPEAKER_00: They are trying to sell a mechanical soul in a world looking for digital convenience.
20:41
SPEAKER_00: Strategy 2035 is a pragmatic retreat.
20:46
SPEAKER_00: By leaning back into gas engines and hybrids, Michael Leaders is giving the brand room to breathe.
20:52
SPEAKER_00: For now.
20:54
SPEAKER_00: He's acknowledging that Porsche must first and foremost be a Porsche, regardless of what powers it.
21:03
SPEAKER_00: If you're an investor, the question is whether you believe in the exclusivity mode and the transition.
21:10
SPEAKER_00: If Porsche can successfully move into the ultra-luxury segment and fix its software issues, the current stock price looks like an absolute bargain.
21:21
SPEAKER_00: But if they are truly entering the Nokia moment, the brand itself will not fix the issue.
21:28
SPEAKER_00: Then even the most efficient V8 will not save the company.
21:32
SPEAKER_00: The 911 million shares on the balance sheets are a small reminder of the brand's history.
21:40
SPEAKER_00: But as Michael Leader stands on that podium, he knows history is a heavy thing to carry.
21:47
SPEAKER_00: The silver crest is still a symbol of excellence, but in 2026, excellence is being redefined.
21:55
SPEAKER_00: Porsche's task is to prove they're the ones writing the definition.
22:00
SPEAKER_00: Drive carefully until the next deep dive.
22:04
SPEAKER_00: As always, stay curious, keep learning, and happy investing.